Prospect of Terasen being sold to foreign interests alarming

Gary Park

Petroleum News Calgary correspondent

The prospect of Terasen, Canada’s third largest energy pipeline company, following Westcoast Energy and falling into foreign hands has sent a tremor through British Columbia.

A comprehensive energy bill scheduled for passage through the British Columbia Legislature this month would remove the 10 percent limit on Terasen ownership by any individual or group, and scrap a requirement that Terasen maintain its head office in Vancouver and ensure that no less than 70 percent of its directors reside in British Columbia.

To some, that raises the specter of Terasen suffering the same fate as Westcoast, which was taken over by Duke Energy for US$3.5 billion in 2001, further weakening the fiber of British Columbia’s business sector.

But a Terasen spokesman has assured reporters that takeover talk is merely “alarmist and totally out of proportion.”

He said Terasen asked for the legislative changes to put the company on the same terms as Canada’s other pipelines and give it the room to grow and expand.

Others, notably Leonard Krog, a candidate for leadership of British Columbia’s left-wing New Democratic Party, is not so sure, arguing the new rules could result in a foreign takeover of Terasen.

More than just changing its name earlier this year from BC Gas, Terasen has seized investor interest with its shares trading at a multiple of 17 to 18 times earnings, has taken significant stakes in two major pipelines and is a leading contender to ship heavy crude from Alberta.

Quite apart from its role as a natural gas distributor to 850,000 British Columbia residential, commercial and industrial customers and its petroleum transportation operations, Terasen owns outright the Trans Mountain pipeline that ships 215,300 barrels per day to the Canadian and U.S. west coasts.

It also has a one-third stake in the 173,000 bpd Express pipeline from Alberta to Cody, Wyo., where it connects with the refurbished 150,000 bpd Platte pipeline to Wood River, Ill.

On the oil sands front, Terasen operates the 300-mile Corridor pipeline from northeastern Alberta’s oil sands fields to Edmonton, has proposed the C$625 million Bison pipeline over a similar route and is weighing the potential twinning of the Trans Mountain system.

“Increasing supply from the Alberta oil sands coupled with increasing U.S. demand are creating exciting future growth opportunities,” Terasen President and Chief Executive Officer John Reid said earlier this month.